SEC lacked jurisdiction to rule on fraud claims in takeover of The Medical City — CA

The Court of Appeals (CA) has ruled that the Securities and Exchange Commission (SEC) had no authority to decide on allegations of fraud in the takeover of The Medical City (TMC).

In a ruling dated February 11, the CA Special 15th Division said the matter should be decided by the trial court as it partially granted the petitions filed by the groups that had acquired a substantial stake in the Professional Services Inc. (PSI), which operates TMC’s hospitals and clinics nationwide.

These include Viva Holdings (Philippines) Pte. Ltd., Viva Healthcare Ltd., Fountel Corp. and Felicitas Antoinette Inc.

Former TMC CEO Alfredo Bengzon had alleged that the petitioners misrepresented and fraudulently concealed the fact that they were acting in concert in securing PSI shares which resulted in the acquisition of more than 50% of the entire issued capital stock of PSI.

The SEC en banc sided with him last August, prompting the petitioners to elevate the issue to the CA.

In its decision, the CA said Bengzon's complaint is in the nature of an intra-corporate dispute and falls within the jurisdiction of the Regional Trial Court (RTC) as provided under Section 5.2 of the Securities Regulation Code.

The CA also said the SEC erred in nullifying the share acquisitions of the petitioners beginning August 1, 2013.

“The SEC en banc does not have the power to declare the increase of the shares of Fountel, FAI, Viva Healthcare and Viva as null and void, or to divest persons of their property by mere administrative action,” the tribunal said through Associate Justice Myra Garcia-Fernandez.

Still, the appellate court found the petitioners administratively liable for failure to report these transactions.

The CA added the SEC erred in directing the Office of the General Counsel to resolve the pending dispute relating to the election of the Board of Directors of PSI as this matter is within the jurisdiction of the RTC.

“We are pleased with the ruling of the Court of Appeals. It has confirmed our contention that the SEC decision was contrary to basic law, as it had the effect of confiscating shares owned and paid for by one party, without going through the judicial processes firmly required by the law,” said Joseph Anthony Lopez, legal representative of TMC chairman Jose Xavier Gonzales.

Gonzales said the CA decision has allowed them “to focus firmly on the future, by giving investors the confidence they need that the money they put in to improve our country’s healthcare system will be safeguarded by the rule of law.”

Associate Justices Ruben Reynaldo Roxas and Angelene Mary Quimpo-Sale concurred in the decision. -NB, GMA News